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Horn surrenders (Photo: David McNew/Getty Images)

The past week was one of the worst at Volkswagen, ever since the EPA ruined both VW’s Passat launch and VW's Frankfurt Motor Show festivities on the same day with the disclosure of VW’s dieselgate cheats. During the week, previously unbesmirched top managers were drawn into the scandal, VW engineers were caught improving the cheater code well after U.S. regulators caught wind, VW’s American CEO Michael Horn stepped down and out, American dealers revolted, plans of a partial retreat of Volkswagen from the U.S. market became known, and if that wasn’t PR disaster enough, Volkswagen’s home state and second-largest shareholder sharply criticized Volkswagen’s confused communication strategy.

The week started with an all hands employees meeting in Wolfsburg. Aging kraut-rocker Peter Maffay (66) took the stage, VW’s Big Band played. The company also has its own philharmonic orchestra, and a brass band, both were kept in reserve. As ever since the post-war days of Volkswagen, the meeting was held in Halle 11, a red brick factory building as old as the Volkswagen Bug. The idea of the meeting was to boost the sagging morale of the working masses, but it didn’t work out that way. Works Council chief Bernd Osterloh warned of “dramatic social consequences” if fines in America will be as hefty as feared. Stephan Weil, member of VW’s Supervisory Board, and premier of Volkswagen’s 2nd largest shareholder, the state of Lower Saxony, predicted that VW “will be confronted with uncomfortable dieselgate news every so often.” Weil didn’t disappoint.

In the same meeting, but with the media removed, the works council chief told his workers of a painful cost reduction program that may even cost the shirts on their bodies. Between 3,000 and 4,000 desk jobs are imperiled. Contract workers may lose their jobs.

The next day, Wednesday, the big bomb dropped. Michael Horn, President of Volkswagen of America resigned, and he was “leaving to pursue other opportunities effective immediately,” Volkswagen said. Meaning: He is out of his contract, free to go, and already has left. Volkswagen’s PR dept. told everybody who called that Horn is leaving on his own volition, a story that found little buy-in. Usually, you can’t just leave like that at Volkswagen. Managers must serve out their contracts. Even if you get fired, it takes a while. ’s R&D chief Wolfgang Hatz and VW R&D chief Heinz-Jakob Neusser, furloughed together with R&D chief Ulrich Hackenberg early in the dieselgate scandal, are still on the company’s payroll. Hackenberg “retired” two months after he was removed from his desk.

In America, dealers did and do suspect that Horn had to go because he stood in the way of Volkswagen’s plan to partially withdraw from America. That plan, mentioned by Volkswagen’s brand chief Herbert Diess in a closed meeting on the sidelines of the Detroit Motor Show, was leaked to Bloomberg on Friday, and it quickly made the rounds. Horn had orders to raise U.S. sales to 800,000 per year, and he committed his dealers to that plan, along with the big investments. Diess was thinking more along a boutique brand strategy, fewer sales, bigger profits for Volkswagen, lost investments for the dealers. The dealers were and are outraged. Car dealers have political clout in America, more clout than Volkswagen, and it won’t even try. Die Welt went through VW's party donations, and all it could find was $7,500 paid 2012 to the Democratic Party in Tennessee.

On Thursday, it became evident that Volkswagen engineers “improved” the cheater code long after Volkswagen came to the attention of U.S. regulators. EPA spokesman Stanley Young told German TV the next day: “This will impact the fines. “ Pro tip for U.S. media which ran the story with a “if true” disclaimer: On Friday, a spokesman for Lower Saxony’s economy minister Olaf Leu said the matter has been known to his boss for a while. The spokesman also said that his boss is “very angry” with Volkswagen, not about the improved cheater code, but about how numbers were communicated “which officially were not communicated.” He referred to the drawdown of 3,000 jobs that made the rounds earlier in the week. His boss was not consulted.